Strategic Dynamics - A New Language for Decision Making / Monthly Mentor - June

Strategic Dynamics - A New Language for Decision Making / Monthly Mentor - June

Strategic Dynamics - A New Language for Decision Making

by JB Hunt

"Don't limit investing to the financial world. Invest something of yourself, and you will be richly rewarded." - Charles Schwab

Global executives are increasingly faced with managing organizational and operational complexity.

Complex acquisitions, global product strategies, multinational research and development consortia, new divisional spin-offs, "basket weave" corporate structures: Corporate leaders must steer their organizations through them all. In addition, a recent focus on process management requires leaders to work across boundaries to influence organizations over which they may lack direct authority or control. Success awaits the corporate leader who can find the right path amid complex and ambiguous business decisions.

To find the right path, senior executives have more knowledgeable help and a greater array of analytic tools than ever before. Even so, many corporate decisions are still made in the ephemeral realm of "gut feelings." And for many senior corporate leaders, that is not good enough. Given the increasing risk of failure and the growing opportunity for success, no senior leader wants to pay the price of poor decisions.

Corporate decision-makers have a better way to address increasing complexity and ambiguity of corporate decisions. A better way to solve problems, balance human know-how and encourage effective and enduring dialogue: strategic dynamics, a simulation technique developed from "systems thinking" theory. Although the system dynamics approach is valid, tested and proven to provide powerful insights, corporate leaders are just beginning to exploit its full potential to improve the quality of their decisions.

We have found that success begins by viewing system dynamics as a leadership philosophy designed to help senior executives discover deeper insights into their business — on their own. The strategic dynamics approach fires the imagination of senior managers, so much so that it changes — and improves — the way they make decisions. Strategic dynamics is a technique for management dialogue and learning built around the core concepts of systems thinking:

1. Any social unit, from a marriage to an organization of nation states, can be viewed dynamically as a system rather than statically as an aggregation of its parts.

2. Parts within any complex system, including a business, interrelate and interact in such a way and with such timing that the consequences of an action are not immediately apparent. A business leader's actions may not simply cause a single reaction but a series of reactions that have far-reaching, long-term consequences for the organization's evolution and may, indeed, abrogate the leader's opportunity to make similar decisions in the future.

3.A key to thorough understanding of the system makes explicit the models or assumptions that managers use to think about, relate to and cope with the system. As Jay Forrester, the father of system dynamics, wrote: "The mental images in one's head about one's surroundings are models… One uses selected concepts and relationships to form a mental image to represent real systems…" So, too, with corporate leaders who carry mental models of businesses, joint ventures or customer relationships in their heads, to simulate the way in which they expect the world to behave.

Through strategic dynamics, leaders can discuss, integrate and test the consistency of their mental models, review their assumptions about their business, simulate the impact of possible decisions (both mentally and through computer modeling) and, most important, simulate the unintended consequences of any decision they plan to make. Through deeper inquiry into the nature of the relationships between the elements of business, strategic dynamics enables executives to make strategic planning operational, and to make operations planning strategic. Leaders who "speak the language" of strategic dynamics develop a deeper understanding of the dynamic shifts in how a business delivers value over time.

The strategic dynamics approach can improve business decision-making. First, it explains the way complexity affects decision-making. Second, it considers how traditional analytical approaches hamper management effectiveness. And third, it illustrates how strategic dynamics brings understanding to the surface, then facilitates better decisions.

Strategic dynamics is a new language for decision-making. It provides the sentence structure, nouns, adjectives, verbs and adverbs with which to simplify and communicate business complexities. Executives can "speak differently" about their business. Strategic dynamics deepens the focus of inquiry into the system itself, not just a computer model. It’s main purpose is to allow leaders to express and structure their thinking quickly, effectively and more efficiently.

This new language gives senior executives a discipline to identify the most important factors in their business and to be confident their strategies are consistent. It provides a way to deal with uncertainty and to move the organization forward in spite of it.

When people totally immerse themselves in learning a new language, they begin to dream and think in that language — and they begin to better understand the culture of that particular society. Above all, a new language can open your eyes to seeing your own world in a totally different light. Become immersed in French, and you see British society differently. Truly absorb Russian, and Germans will never look the same. Speak the language of strategic dynamics, and you will see your business differently — and, as a result, further enhance your executive decision-making capabilities.